Our latest applicant is worried about the impact a debt relief program might have on his credit rating. It is already in bad shape with all of the credit cards that he has and the level of debt that he has compared to his income. There are several solutions to his issues, some might be worthwhile pursuing, however he is going to have some sort of impact on his credit rating. The question is how to minimize the impact.
He has a number of credit cards all max’d out to the limit. This alone is a negative impact on his rating. He really should have managed the situation better, but now the damage is done.
The best solution is to apply for and be approved for a consolidation loan at a lower interest rate which will improve his cash flow and as a result will pay less interest. By paying this loan off in full, he will also improve his rating.
Another approach is to apply for a debt relief program. The process involves negotiation with the lenders to come to agreement on a total amount that will be paid, which is less than the original total amount. Using a professional negotiator to assist you can be a benefit for some customers since they understand the process and have all of the negotiation techniques well understood. Regardless of how you go about this it is important to always obtain all agreements in writing and have all parties sign off on the deal so there are no surprises.
In most cases there will be a negative impact on credit ratings since the lender is taking a haircut on the total amount that was originally owed to them. In addition the borrower may be required to come up with the new loan amount in one lump sum which can be difficult for many people.
If you plan to borrow money in the future, a damaged credit rating can make it difficult to obtain a loan and if you do, the interest rates may be high for a personal loan. Evaluate each of these carefully before making a decision.
DEFAULT LOAN APPLICATION FOR BORROWER’S INFORMATION
Home/Mortgage Loan Amount :: $25,000
Home Loan Application and Processing Speed (when do you need the funds):: by the end of the month before my credit card accounts become due again and I have to pay more interest
Do you currently have a mortgage? :: no, I rent an apartment and I am afraid of getting behind on my rent or miss payments on my credit cards.
What City/Town, State and County do you live in? :: Palmdale, California
What is your employment field? :: Customer Care Worker
Employment Position :: Call Center Operator
When are you paid? (monthly/weekly/biweekly):: Bi-weekly
Your credit rating to be – excellent, fair, or bad? :: bad
How did you find us? :: looking for debt settlement relief programs online
How are you paid? (direct deposit/paper check):: Direct Deposit
Gross Amount Per Paycheck ::$960
Do you agree to have this information published online, without your PRIVATE information of course? :: no problem, as long as the personal stuff stays private
Extra information here please (some detail):: I work in a call center for a major company here in the Palmdale area. We take calls for all kinds of customers across the country, enter the data into an online customer care system and send the tickets off to the proper company. I have worked at this location for the past 12 months and have no reason to expect that I will not be there for another couple of years. It is not the best job in the world, but at least it is steady and I get paid on a regular basis.
The problem I have is that I charged too much to a bunch of credit cards and now cannot repay the balances. They are charging an arm and a leg in terms of interest and even though I make the monthly payments, I cannot reduce the balance substantially. I am basically broke, living from one pay check to another with nothing left over for savings or to even have a bit of fun. Somehow I really need to fix this. All I do is pay the minimum payment each month on each of them and the balance barely declines.
Note to Lender :: I would like to know what my options are to resolve this problem. I do not want to declare bankruptcy and I am unsure about a debt relief program. Apparently you can negotiate your total debt down to a more reasonable number and get control of what you owe. If I could somehow make this happen, it would be a wonderful thing and maybe I could my life back instead of trying to meet all of these payments.
I also want to know what impact this is going to have on my credit rating and whether a debt relief program will impact it or not. I know my credit rating is already not that great, but I do not want to make it any worse than it already is. Any advice in this area that you can provide would be appreciated.
|Category: Home Mortgage Loan||APR 5.97%||APR 7.97%||APR 9.97%|
|Length of Term||3||4||5|
|Amount to be paid||$27,300.51||$29,067.26||$31,333.92|
|Total interest paid||$2,300.51||$4,067.26||$6,333.92|
|Paid per installment||$747.96||$597.27||$515.08|
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